La-Z-Boy Reports Record Fiscal 2023 Second-Quarter Results; Increases Dividend By 10%

MONROE, Mich., Nov. 30, 2022 (GLOBE NEWSWIRE) -- La-Z-Boy Incorporated (NYSE: LZB), a global leader in residential furniture, today reported record-setting second-quarter results for the period ending October 29, 2022.

Fiscal 2023 second-quarter highlights versus prior year:

• Consolidated sales increased 6% to $611 million, a second-quarter record
  
  
• GAAP operating profit increased by 14%
  - Non-GAAP operating profit increased by 19%
  - GAAP operating margin increased 70 basis points to 10.1%
  - Non-GAAP operating margin increased 100 basis points to 10.0%

• GAAP EPS increased by 20%
  - Non-GAAP EPS increased by 24%

• Retail segment sales increased 31% to $252 million, an all-time quarterly record
  - Operating profit also all-time quarterly record

Melinda D. Whittington, President and Chief Executive Officer of La-Z-Boy Incorporated, said, "We delivered record second-quarter sales and operating performance in a challenging environment led by our company-owned Retail business. Strong supply chain execution in the period allowed us to reduce our backlog and improve service to customers and consumers as we continue to shorten lead times and move closer to delivering on our brand promise — quality custom furniture with speed to market. On the strength of that value proposition, our business remains larger than pre-pandemic levels as consumers continue to place a value on the comfort of their homes and entrust La-Z-Boy to deliver it."

Whittington added, "As we face near-term macroeconomic and geopolitical headwinds that have slowed the pace of written sales, we are operating from a position of brand and financial strength. We remain focused on the long term, controlling what we can, and positioning the company to move through this period with ongoing operational excellence. We are pivoting quickly to respond to market dynamics, including proactively aligning our cost structure with demand, and making prudent investments to drive long-term profitable growth through Century Vision. As we tackle what lies ahead, we are confident we will navigate the environment well, build for the future, and emerge stronger while increasing market share throughout these challenging times."

Key Results:

Liquidity Measures:

FY23 Q2 Results vs. FY22 Q2:

Consolidated Results:

• Consolidated sales in the second quarter of fiscal 2023 increased 6% to $611 million, with the realization of pricing and surcharge actions and the positive effects of a favorable product and channel mix offsetting lower delivered unit volume
• Consolidated GAAP operating margin was 10.1% versus 9.4%
• Consolidated non-GAAP (1) operating margin was 10.0% versus 9.0%
   - Improved operating margin was driven primarily by a focus on manufacturing and delivering our consumer sold backlog for our company-owned Retail stores and the benefit of pricing and surcharge actions, partially offset by higher input costs and marketing investments
• GAAP diluted EPS increased 20% to $1.07 from $0.89; non-GAAP (1) diluted EPS increased 24% to $1.05 from $0.85
  

Retail Segment:

• Sales:
   - Delivered sales increased 31% to an all-time quarterly record of $252 million; delivered same-store sales increased 25%, as we improved service to consumers and moved closer to pre-pandemic lead times in the period
   - Total written sales for the company-owned La-Z-Boy Furniture Galleries® stores (the company's Retail segment) decreased 5%, reflecting softer demand across the industry driven by economic uncertainty and weaker consumer sentiment
  • Written same-store sales for the company-owned La-Z-Boy Furniture Galleries® stores decreased 10%
  • Written same-store sales were 12% higher than pre-pandemic levels (FY20 Q2)

• Operating Performance:
   - Non-GAAP (1) operating margin and operating profit increased to all-time records of 16.5%, and $42 million, respectively, versus 12.5%, and $24 million in last year's second quarter, primarily driven by fixed-cost leverage on higher delivered sales volume
  

Wholesale Segment:

• Sales:
   - Increased 2% to a second-quarter record of $446 million driven by the realization of pricing and surcharge actions coupled with favorable channel and product mix; these factors were partially offset by lower volume, primarily the result of some dealers delaying receipt of finished goods due to warehouse constraints
• Operating Margin:
   - Non-GAAP (1) operating margin was 8.6%, 50 basis points below prior year; pricing and surcharge actions were more than offset by increased raw material costs, plant inefficiencies due to lower volume, and increased marketing spend to pre-pandemic levels

Corporate & Other:

• Joybird delivered sales decreased 5% to $38 million, and written sales declined 27% versus the year-ago second quarter, reflecting both slowing e-commerce trends and the effects of changes in campaign execution with a key marketing partner which have since been reversed
• Joybird posted a loss for the period, primarily reflecting lower volume, an unfavorable shift in product mix, and a lower return on advertising spend

Balance Sheet and Cash Flow as of FY23 Q2

• Ended the quarter with $208 million in cash (2) and $19 million in short-term investments to enhance returns on cash, and no external debt
• Year to date, generated $31 million in cash from operating activities versus $15 million in the prior-year six-month period
• Year to date, spent $40 million on capital expenditures, primarily related to La-Z-Boy Furniture Galleries® store projects, new stores, and upgrades at our manufacturing and distribution facilities
• Year to date, returned $19 million to shareholders, including $14 million in dividends and $5 million in share repurchases; the company has approximately 7.3 million shares available for repurchase under its authorized share repurchase program

Dividend

On November 30, 2022, the Board of Directors declared a quarterly cash dividend of $0.1815 per share on the common stock of the company, an increase of 10% over the prior quarter. The dividend will be paid on December 20, 2022, to shareholders of record on December 12, 2022.

Outlook

Bob Lucian, Chief Financial Officer of La-Z-Boy Incorporated, said, "As we successfully reduce our backlog to enable pre-pandemic consumer lead times, we expect the second half of our fiscal year to be impacted by continued external headwinds on consumer demand. As a result, we estimate delivered sales for the fiscal 2023 third quarter to be in a range of about $525 million to $535 million, and consolidated non-GAAP operating margin to be in a range of about 7.0% to 7.5%."

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(1)Non-GAAP amounts for thesecondquarter of fiscal2023exclude:

• a purchase accounting benefit related to acquisitions completed in prior periods totaling$0.4 millionpre-tax, or$0.01per diluted share, primarily due to the write-off of the Joybird contingent consideration liability based on forecasted future performance, with$0.4 millionincluded in operating income andless than $0.1 million included in interest expense.
• a benefit of$0.3 millionpre-tax, or$0.01per diluted share, related to our business realignment plan, including costs associated with the closure of our Newton, Mississippi manufacturing facility.

Non-GAAP amounts for thesecondquarter of fiscal2022exclude:

• purchase accounting charges related to acquisitions completed in prior periods totaling$0.9 millionpre-tax, or$0.02per diluted share, with$0.8 millionincluded in operating income and$0.1 millionincluded in interest expense.
• a$3.3 millionpre-tax, or$0.06per diluted share, gain on the sale of the Newton, Mississippi facility related to the company's business realignment, announced in June 2020.

Please refer to the accompanying “Reconciliation of GAAP to Non-GAAP Financial Measures” for detailed information on calculating the Non-GAAP measures used in this press release and a reconciliation to the most directly comparable GAAP measure.

(2)Cashincludes cash, cash equivalents and restricted cash

Conference Call

La-Z-Boy will hold a conference call with the investment community on Thursday, December 1, 2022, at 8:30 a.m. Eastern time. The toll-free dial-in number is 888.506.0062; international callers may use 973.528.0011. Enter Participant Access Code 642911.

The call will be webcast live, with corresponding slides, and archived on the Internet. It will be available at https://lazboy.gcs-web.com/. A telephone replay will be available for a week following the call. This replay will be accessible to callers from the U.S. and Canada at 877.481.4010 and to international callers at 919.882.2331. Enter Replay Passcode: 46910. The webcast replay will be available for one year.

Cautionary Note Regarding Forward-Looking Statements

This news release contains “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. Generally, forward-looking statements include information concerning expectations, projections or trends relating to our results of operations, financial results, financial condition, strategic initiatives and plans, expenses, dividends, share repurchases, liquidity, use of cash and cash requirements, borrowing capacity, investments, future economic performance, business and industry and the effect of the coronavirus (“COVID”) pandemic on our business operations and financial results.

The forward-looking statements in this press release are based on certain assumptions and currently available information and are subject to various risks and uncertainties, many of which are unforeseeable and beyond our control. Additional risks and uncertainties that we do not presently know about or that we currently consider to be immaterial may also affect our business operations and financial results. Our actual future results and trends may differ materially depending on a variety of factors, including, but not limited to, the risks and uncertainties discussed in our fiscal 2022 Annual Report on Form 10-K and other factors identified in our reports filed with the Securities and Exchange Commission (the "SEC"), available on the SEC's website at www.sec.gov. Given these risks and uncertainties, you should not rely on forward-looking statements as a prediction of actual results. We are including this cautionary note to make applicable and take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 for forward-looking statements. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or for any other reason.

Additional Information

This news release is just one part of La-Z-Boy’s financial disclosures and should be read in conjunction with other information filed with the SEC, which is available at: https://lazboy.gcs-web.com/financial-information/sec-filings. Investors and others wishing to be notified of future La-Z-Boy news releases, SEC filings and quarterly investor conference calls may sign up at: https://lazboy.gcs-web.com/.

Background Information

La-Z-Boy Incorporated is one of the world’s leading residential furniture producers, marketing furniture for every room of the home. The Wholesale segment includes England, La-Z-Boy, American Drew®, Hammary®, Kincaid® and the company's international wholesale and manufacturing businesses. The company-owned Retail segment includes 169 of the 351 La-Z-Boy Furniture Galleries® stores. Joybird is an e-commerce retailer and manufacturer of upholstered furniture.

The corporation’s branded distribution network is dedicated to selling La-Z-Boy Incorporated products and brands, and includes 351 stand-alone La-Z-Boy Furniture Galleries® stores and 526 independent Comfort Studio® locations, in addition to in-store gallery programs for the company’s Kincaid and England operating units. Additional information is available at http://www.la-z-boy.com/.

Non-GAAP Financial Measures

In addition to the financial measures prepared in accordance with accounting principles generally accepted in the United States ("GAAP"), this press release also includes Non-GAAP financial measures. Management uses these Non-GAAP financial measures when assessing our ongoing performance. This press release contains references to Non-GAAP operating income, Non-GAAP operating margin, and Non-GAAP net income attributable to La-Z-Boy Incorporated per diluted share (and components thereof, including Non-GAAP income before income taxes, Non-GAAP net income attributable to La-Z-Boy Incorporated), which may exclude, as applicable, business realignment charges and purchase accounting charges. The business realignment charges include severance costs, asset impairment costs, and costs to relocate equipment and inventory related to organizational changes we undertook as a result of our response to COVID, including a reduction in the company's work force, temporary closure of certain manufacturing facilities and subsequent gains resulting from the sale of related assets. The purchase accounting charges may include the amortization of intangible assets, incremental expense upon the sale of inventory acquired at fair value, amortization of employee retention agreements, fair value adjustments of future cash payments recorded as interest expense, and adjustments to the fair value of contingent consideration. These Non-GAAP financial measures are not meant to be considered superior to or a substitute for La-Z-Boy Incorporated’s results of operations prepared in accordance with GAAP and may not be comparable to similarly titled measures reported by other companies. Reconciliations of such Non-GAAP financial measures to the most directly comparable GAAP financial measures are set forth in the accompanying tables.

In addition, this press release references the Non-GAAP financial measure of “Non-GAAP operating margin” for a future period. Non-GAAP operating margin may exclude items such as pre-tax purchase accounting charges and pre-tax business realignment charges. These and other not presently determinable items could have a material impact on the determination of operating margin on a GAAP basis and due to the probable variability and limited visibility of excluded items, therefore, we have not provided a reconciliation of Non-GAAP operating margin for future periods in this press release.

Management believes that presenting certain Non-GAAP financial measures will help investors understand the long-term profitability trends of our business and compare our profitability to prior and future periods and to our peers. Management excludes purchase accounting charges because the amount and timing of such charges are significantly impacted by the timing, size, number and nature of the acquisitions consummated and the success with which we operate the businesses acquired. While the company has a history of acquisition activity, it does not acquire businesses on a predictable cycle, and the impact of purchase accounting charges is unique to each acquisition and can vary significantly from acquisition to acquisition. Similarly, business realignment charges are dependent on the timing, size, number and nature of the operations being moved or closed, and the charges may not be incurred on a predictable cycle. Management believes that exclusion of these items facilitates more consistent comparisons of the company’s operating results over time. Where applicable, the accompanying “Reconciliation of GAAP to Non-GAAP Financial Measures” tables present the excluded items net of tax calculated using the effective tax rate from operations for the period in which the adjustment is presented, except for the non-tax deductible goodwill impairment charge and the adjustment to the fair value of contingent consideration which reflects the associated GAAP tax impact in the period presented.

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